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  1. B

    Maximum VAR for the portfolio

    Hi, This is a question from a Garp practice exam. Why in this question can we not use the sum of absolute VAR for Alpha and absolute VAR for Omega to calculate the maksimum possible VAR for portfolio. The maximum possible daily VAR is then based on a correlation(p) = 1 between Alpha and...
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    Volatility smile and Expected Shortfall

    Hi, This is a question out of a old GARP paper. Can you please help me understand why the answer looks at the left tail when explaining the answer. Why would one in this question ignore the right tail. Does the right tail not reflect the ES? Therefore if one argue the implied distribution...
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    GARP.FRM.PQ.P1 No arbitrage FX market (garp13-p1-6)

    Hi, Can you please help me understand why the answer uses continuously compounded rates and not annual rate. In this question the answer is the same whether using continuosly or annual compounding, but may not always be the same. Question You are examining the exchange rate between the U.S...
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    Swap maximum potential exposure

    Hi, Can you please assist in explaining why the duration of the bond is 7 years I.e. (10)0.5] and why the answer multiplies by 3.16? Is this also a type of question we can expect in the exam? Question: Hong Kong Shanghi Bank has entered into a repurchase agreement with a client where the...
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    EWMA

    In the following question, I agree that b is the correct answer, but why is "a" not also correct. The EWMA do not include the mean reversion term (i.e product of weight and long run variance). But does this not indirectly assume that the long run volatility/variance is zero in EWMA, therefore...
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    Calculation of Beta

    I have a question from GARP 2014 practice exam. Suppose the S&P 500 has an expected annual return of 7.6% and volatility of 10.8%. Suppose the Atlantis Fund has an expected annual return of 8.3% and volatility of 8.8% and is benchmarked against the S&P 500. If the riskfree rate is 2.0% per...
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    Government Bond Futures

    Hi, can you please explain why the value of government bond futures decline when interest rates increase. Following question from the GARP 2015 practice exam. A German housing corporation needs to hedge against rising interest rates. It has chosen to use futures on 10-year German government...
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    Market Risk Spreadsheets

    Hi, Could you please assist in directing me to where I can find the following market risk spreadsheets for Tuckman chapter 9 and 10. Or will they only be published at a later stage. T5.29.9 Drift Models T5.29.10_TS_vol_distribution Thanks
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